RENEWABLE ENERGY FACTS – Unlocking the potential of renewables in the Americas
Following the Paris Agreement (in 2016) countries in the Americas have set ambitious targets for the deployment of renewable energy. Over the years it has been observed that the use of renewable energy has increased in the region which has created need for the upgradation of the electricity grid infrastructure. Renewable energy is an intermittent source of energy and Flexible AC Transmission Systems (FACTS) devices are being deployed in the region to provide required support to the electricity grid.
The US is leading the Flexible AC Transmission Systems (FACTS) market of the Americas and is expected to remain regional leader in the future as well. In terms of FACTS deployment, US is followed by Canada, Mexico, Brazil, and Argentina. Countries in the Americas including US, Canada, Mexico, Brazil, Chile and Argentina have set targets for the deployment of renewable energy which in turn is driving the region’s FACTS market.
Renewable energy targets of key countries in Americas
Biden Administration in the US has plans to phase out fossil fuel fired generation by 2035. The US is aiming to increase the share of renewable energy in the generation mix to 80 % by 2030 and to 100 % clean energy by 2035. On the other hand, Canada is planning to reduce their energy consumption and ensure access to clean and renewable energy. Their target for SDG7 includes increasing the share of renewable energy and non-emitting sources to 90 % by 2030 and to 100 % in the long term. In South America, Brazil has also set targets to increase the share of renewable energy in the energy mix to 45 % by 2030 and to 23 % in the power supply by 2030.
Similarly, Chile is also planning to drastically increase the share of renewable energy in the energy mix and has set a target to increase the share of renewable energy to 70 % of its total energy consumption by 2030. Chile has also pledged to achieve carbon neutrality by 2050. On the other hand, Argentina is planning to increase the share of generation from renewable energy to 20 % by 2025.
It is noteworthy that the region has favorable conditions for the deployment of renewable energy including solar and wind energy resources, supportive government policies and regulations and increasing awareness around the need to transition to clean energy resources from conventional sources of energy.
Landscape of FACTS in Americas
According to PTR Inc., majority of the demand for FACTS in the Americas is generated in the US which is followed by Brazil, Canada, and Mexico. It is noteworthy that the world’s first FACTS device was installed in the US in the late 1920s whereas around 700 FACTS devices have been installed in the country so far. Figure 2 shows the top FACTS markets in the Americas.
Technology split in the FACTS market
As far as the technology split is concerned, PTR Inc. has observed that hundreds of Static VAR Compensators (SVCs) have been deployed in the region in the past. But recently the FACTS market of Americas has observed a marked shift from SVCs to Static Synchronous Compensators (STATCOM). From 2013 onwards till 2017, around 82 % of the FACTS installations were SVC while around 18 % were STATCOM. From 2018-2022, 66 % of the FACTS installed were STATCOM whereas only 34 % of the devices installed in the Americas were SVCs.
Application split in the FACTS market
From the standpoint of application, FACTS market in the Americas has largely remained utility centric. After utilities, the majority of the demand for FACTS devices originated from industries. It is significant to note that steel mills with electric arc furnaces are highly energy intensive which usually require deployment of SVCs or STATCOMs in order to keep the flicker caused by EAF within limits stipulated in the grid code. The US is a major producer of steel and has more than 100 steel mills which are currently operational. A number of these steel mills are equipped with SVCs or STATCOM.
On the other hand in South America, PTR Inc. observed that MV STATCOMs are installed with mining loads that are located in the area where the electricity grid is not reinforced. From 2013 onwards till 2017, the majority of the FACTS were deployed in the utilities accounting for 90 % of the total deployment. Only 8 % of the FACTS were installed in the industry which was followed by renewables where only 2 % of the FACTS were deployed.
From 2018-2022, the share of utility dropped from 90 % to 75 % but still the majority of the FACTS were deployed in the utilities. As far as the deployment of FACTS in industry is concerned, around 21 % of the FACTS were installed in the industry. Industry is followed by renewable energy when it comes to deployment of FACTS where only 4 % of the total FACTS were deployed.
It is noteworthy that as the grid codes have become stricter over the years especially when it comes to energy intensive industries, the demand for FACTS has observed a significant rise (specifically in the last five years) from the industrial sector as evident from the figures above. Wind and solar farms are emerging applications of FACTS devices in Americas which in order to meet stringent grid connection requirements opt for MV STATCOMS.
PTR Inc. has further observed that majority of demand for FACTS for deployment with renewables in the last five years has originated from the US but it is expected that as other countries in Americas move towards renewables the trend will change in the future.
Country Specific Landscape of FACTS
FACTS market in the Americas is segmented into North America and South America. US, Canada and Mexico are key countries in the North America whereas Brazil, Chile and Argentina are key economies in South America. As far as the FACTS market is concerned majority of the demand for FACTS in the Americas originates from the US whereas Argentina in the South America is on another extreme which is not an active FACTS market.
The demand for FACTS in the US is largely coming from Investor-Owned Utilities (IOUs). In recent years it is observed that several utilities in the country have deployed large STATCOMs due to aging grid infrastructure and integration of renewable energy with the grid. It is expected that the utilities will continue to deploy STATCOMs in the future as well.
Furthermore, PTR Inc. believes that utilities in the US that are retiring conventional power plants are also deploying FACTS in order to cater potential grid instability issues. Offshore wind farms are also driving the market of FACTS in the US. It is significant to note that the developers and utilities will continue to deploy STATCOMs with a focus on improving network strength and meeting grid connection requirements in the future.
The deployment of FACTS in Canada is not very widespread however all major utilities in the country for instance Manitoba Hydro, Hydro-Quebec, BC Hydro etc. have FACTS devices installed in their network. It is significant to note that in majority of the projects in the country series capacitors have been installed instead of some sophisticated technology.
In Mexico, due to budgetary constraints utility sector historically has largely deployed either SVCs or series capacitors. However, Mexico has plans to install STATCOMs and SVCs in their electricity grid network. It is noteworthy that Mexico has not been able to meet goals concerning the development of transmission and distribution network.
Similar to the US, Mexico has a small market for industrial FACTS due to presence of steel industry in the country. For industrial FACTS, Mexico has welcomed Asian players which are supplying MV STATCOMs to industrial customers in order to meet the ever-evolving power quality requirements of the utilities within the available budget.
Brazil, Chile and Argentina are key economies in South America. Brazil has a well-developed transmission infrastructure with a mature FACTS market and a demand center for FACTS devices. The country is also home to one of the largest FACTS manufacturing facilities owned by a key FACTS OEM. It is significant to note that like Canada in North America, Brazil in South has considerable installed base of series capacitors. However, in recent years, in order to facilitate integration of renewables with the electricity grid Agência Nacional de Energia Elétrica ANEEL), a Brazilian federal energy regulator has deployed SVCs as well.
On the other hand Chile, is making investments on improving their transmission infrastructure which will in turn provide required support for integration of renewable energy with the electricity grid. Chile has also deployed FACTS devices in recent years, and it is observed that their focus is on deploying synchronous condensers in the future.
Argentina is a key economy in South America but has not been an active market for FACTS devices in Americas due to economic crisis. PTR Inc. believes that due to ongoing financial challenges, access to international funding for FACTS projects is nearly impossible in the country. However, there are discussions going on for Chinese equity to revamp the power grid of Argentina.
PTR Inc. has observed that the system operators in the Americas are preparing well ahead of time so that they are better able to manage the widespread deployment of renewable energy in future. System operators in the region are deploying FACTS devices which are capable of providing much needed support to the electricity grid infrastructure.
PTR Inc. believes that the offshore wind energy market in the US is yet to take off and as countries like US in the Americas are able to unlock the offshore wind energy potential the demand for FACTS in the region will further increase.
It is noteworthy that US is a leading FACTS market in the Americas and is expected to continue leading the region in the coming years as well. The majority of the demand for FACTS in the Americas is generated from Investor-Owned Utilities which are followed by demand from industries and renewables. PTR Inc. expects that in coming years the share of renewable energy in the application split of FACTS market of the Americas will further increase. Share of renewable energy in the application split of FACTS market of the Americas increased to 4 % from 2018-2022.